After months of gas prices making life more expensive, they have quietly begun to decline, bringing financial relief to many Americans.
The nationwide average price this week was $4.49 a gallon, down from a high of $5.01 in June. The average price of gasoline is still about $1.30 higher than it was a year ago, but has now been falling for over a month.
This is good news for consumers: rising gas prices are not only affecting people who fill up their cars, but also, due to higher transport costs, the price of almost everything else.
Falling prices are also potentially good news for political and social stability. Because gasoline prices are so visible — posted on giant billboards across the country — they have an outsized impact on how Americans think things are going, experts say. The sentiment can go beyond financial concerns.
Consider Russia’s invasion of Ukraine, which sent gas prices skyrocketing in the West as Europe pledged to stop relying on Russian oil and gas. Since the start of the war, American and European leaders have feared that rising gasoline prices could hurt public support for efforts against Russia because people might come to view the personal cost as too high. Lower gas prices could therefore help to maintain public support for Ukraine.
Historically, rising gasoline prices have also hurt incumbent political leaders. Sure enough, approval ratings for President Biden and European leaders have plummeted as prices for gas and other goods have risen. Unchecked, this is the kind of widespread disapproval that can lead to global political instability and extremism. In Italy, for example, the recent collapse of the government could give way to a takeover by a far-right alliance that includes a political party with neo-fascist roots.
But gas prices also reach into something deeper than partisan politics or any individual political debate: they help dictate the public mood. As the pandemic subsided, Americans hoped for a return to normalcy. But rising gasoline prices and inflation, along with an increase in violent crime and war in Ukraine, are instead fueling a broader sense of chaos and anomie already stoked by Covid. It is as if the Americans had exchanged certain crises for others.
“Is it real?” Caroline McNaney in New Jersey remembers thinking. “I took a job further from home to make more money, and now I feel like I haven’t done anything for me because the gas is so high.”
Falling gasoline prices therefore provide the kind of respite people have been looking for after a few chaotic years.
Why gas prices have fallen
Several factors are behind the good news. Oil and gas production has increased in the United States and elsewhere, increasing supply. Some people drive less to avoid high prices, which decreases demand. Continued Covid disruptions, particularly in China, also played a role; the closures lead to fewer people travelling, further reducing global demand for oil and gas.
The process is slow, the result of what experts call the “rocket and feather” effect: gasoline prices tend to rise quickly, like a rocket, and fall more slowly, like a feather. Gas stations are quicker to raise prices and slower to lower them to maximize profits. And while rising gas prices encourage consumers to compare more, falling prices make it easier to do so, reducing competitive pressure.
Since gas prices are falling more slowly than they are rising, they still have room in the coming weeks to catch up with falling oil prices, said MIT economist Christopher Knittel.
And strange as it may seem, a weaker economy could help lower gasoline prices further. The Federal Reserve recently raised interest rates, raising the cost of borrowing in an effort to lower demand and control inflation. This could lead to more unemployment, but also slower price increases after months of record inflation.
Beyond a few weeks, the future of gasoline prices is less certain. “There are still risks there,” said Rachel Ziemba, energy expert at the Center for a New American Security.
Among them: Further atrocities in Ukraine could yet cause Europe to stop buying Russian oil and gas. Russia could retaliate against Western sanctions by withholding shipments, which would again tighten global supply. Climate change continues to make oil and gas companies reluctant to increase production too much. China’s economy could improve and increase demand, particularly if Covid restrictions ease.
But for now, falling petrol prices are good news in a summer marked by headlines about inflation, war, heat waves and rising Covid cases.
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